Rapid Ecommerce growth causes rise in warehouse rental rates

The growth that ecommerce has experienced in recent years has helped warehousing and industrial organisations to recover from the impact of the global financial crisis according to the Financial Times.

The chief executive of leading industrial property landlord Prologis Hamid Moghadman said that rental rates have fallen by a quarter since the global financial crash. However, recently there has been fast growing demand from consumers which has led to resurgence in demand for warehousing. Companies may be investing in building new warehouses or outsourcing their ecommerce fulfilment services to deal with the demand.

The future ecommerce comapnies

Warehouse rates “are coming out of that hole very quickly. Pricing power is returning,” says Mr Moghadam. So what can we expect from ecommerce organisations?

Outsourcing ecommerce fulfilment services - There are several ecommerce fulfilment companies who offer order processing services to ensure the efficient delivery of goods ordered online. This is a great option if you cannot afford to build your own warehouse. Outsourcing your online fulfilment will enable retailers to gear more resources into growth and merchandising.

Building new warehouse? - The article by the financial times highlights the opinion of logistics consultants who believe it is hard to adjust existing warehouses which are deemed as old fashioned. New warehouses must be capable of catering for smaller orders, sustaining greater employee density and taking warehouse location into consideration (close to major transport links and urban areas). We may see an increase in organisations building their own bespoke warehouses which cater for their needs.

Increase in demand for ecommerce marketing and web development -The success of an ecommerce operation often boils down to how well the ecommerce website is built, maintained and marketed. For larger, well established retail chains, these issues are not as important as relatively unknown brands that need to establish themselves and build a brand image. We can expect to more organisations investing in ecommerce website development and marketing.

Is this the end for bricks and mortar?

There are two sides to coin when looking at the rise in the demand for ecommerce. The shift to online shopping has flagged up questions about the future of bricks and mortar and whether this is still a profitable outlet. However, many believe that the nature of the two channels is different and one often complements the other. In the case of purchasing phones for example, its every easy to just order a phone online, however, phone stores are being used a customer service centre to great effect. Again, it is the multichannel approach that is proving the most popular, coupling physical stores with an online presence to make sure retailers are exactly where their consumers are.

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